Ladbrokes posts online gains in Q3 but investors punish stock anyway

TAGs: Ladbrokes, Richard Glynn

ladbrokes-richard-glynn-lifeStruggling UK-listed bookmakers Ladbrokes did their best Monty Python ‘not quite dead yet’ impression in Q3, posting a 13% rise in revenue and a 94% gain in operating profit to £33m. Embattled CEO Richard Glynn (pictured) celebrated the release of the interim management statement by saying Ladbrokes was “on track” and full-year results will be “in line with our expectations.”

Ladbrokes’ Playtech-powered online division reported revenue up 45.9% in the three months ending Sept. 30, thanks to the second half of the 2014 FIFA World Cup. (Absent the World Cup, digital revenue would have risen a more modest 16.8%.) Online betting handle rose 21.6% and win rate rose 2.2 points to 8.9%, while the margin on World Cup wagers hit 18.5%. Lads’ mobile offering posted decent gains, with active customers up 80% and mobile wagering up 113%. Online gaming revenue rose 1.4%, the first time in six quarters that number’s been in positive territory.

Lads’ new Australian operations earned the most dramatic accolades, with betting handle up 43%, active customers up 124% and revenue up 172%. The Australian additions accounted for half of Q3’s overall online growth. As for Lads’ online operations in Belgium, Spain and the Betdaq betting exchange, Lads got no more specific than to say results were in line with expectations.

At the retail level, OTC betting revenue rose 6.3% as margins rose 2.1 points to 17%. The fixed-odds betting terminals (FOBT) in Lads’ betting shops reported revenue up 4.9% despite lower stakes. Lads’ total complement of UK shops decreased by 49, closing out Q3 with 2,231 but further closures in 2015 “remain inevitable” due to the March 1, 2015 imposition of the new 25% machine games duty (MGD).

Retail operations outside the UK were a mixed bag, with Belgium reporting revenue up 21% and the Spanish joint venture rising 82.9%. Irish revenue was up a mere 1.1%, as OTC handle fell 11.4%. Telephone revenue rose £2.9m while High Rollers revenue gained 41.4%, generating an operating profit of £4m, up £1.1m from Q3 2013.

Despite the positive numbers, Lads shares closed out Thursday’s trading down 6% to 121.1p, as investors appeared concerned that Lads’ turnaround was due more to favorable sporting results rather than management tinkering. Earlier this week, Numis analysts predicted the increased MGD and the Dec. 1 implementation of the 15% point-of-consumption tax on online wagers would cost William Hill £100m in 2015. On Thursday, Numis echoed similar concerns about Lads facing “an almost inevitable profit decline in 2015.”


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